Cyprus Investment Funds – The Alternative Choice

Cyprus continues to surface as one of the top EU investment fund centers. With the transposition of the Alternative Investment Fund Managers Directive in 2013, the enactment of the Alternative Investment Funds Law in 2014, the transposition of UCITS V in 2016 and the upgrade of the Alternative Investment Funds Law in 2018, the legislative framework of Cyprus came to join the most attractive ones in the EU with regards to the authorization and operation of regulated investment funds.

On 3^rd July 2020, the legislative framework was further enhanced with new legislation that took advantage of the flexibility provided by EU Directive 2011/61/EU, allowing Member States to apply a lighter regime for sub-threshold AIFMs. The new legislation titled the “Law which provides for the Incorporation and Operation of Small Alternative Investment Fund Managers” provides for small AIFMs, also known as “Mini Managers” to be set up with their sole activity being the management of Alternative Investment Funds (“AIFs”) that have:

1. Assets under Management (“AuM”), including any assets acquired through the use of leverage, in total not exceeding a threshold of €100m; or
2. In total, AuM not exceeding a threshold of €500m where the portfolios of AIFs consist of AIFs that are unleveraged and where investors cannot redeem their interest/units in the first five years after investing (the “AIFMD Thresholds”).

The last piece of the puzzle will be the enactment of the long-awaited law regulating the provision of fund administration services, which is expected to come in force soon.

Taking into consideration the above, the favorable tax regime of Cyprus as well as the additional tax breaks offered both to highly paid individuals relocating to Cyprus as well as to fund managers, Cyprus seems to have entered the game of the global funds industry as a serious contender to the traditional funds jurisdictions.

Based on the statistics for the 4^th quarter of 2019, CySEC had under its supervision in total 210 Management Companies and Undertakings of Collective Investments (UCIs). The Total Assets Under Management (AUM) for the 4^th quarter of 2019 reached €8.3 billion, recording a 8% increase compared to the 3^rd quarter of 2019 and the UCIs managed by the Management Companies had a Net Asset Value (NAV) of €6.4 billion. Looking back at 2012 where AUM in Cyprus were as low as €2.1 billion, one can understand the huge growth the industry is evidencing.

Players in the fund industry are now able to choose among the following structures:

• Alternative Investment Fund (“AIF”);
• Alternative Investment Fund for Limited Number of Persons (“AIFLNP”);
• Registered Alternative Investment Fund (“RAIF”);
• Undertakings for Collective Investment in Transferable Securities (“UCITS”);
• – UCITS Management Companies;
• Alternative Investment Fund Manager (“AIFM”);
• Small Alternative Investment Fund Managers or “Mini Manager”.

Our team of experts are able to assist in the authorization and ongoing regulatory support for any of the above setups. Please feel free to reach out to a member of our team for more details